Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index gaining 2.20% in January1 while underlying markets as represented by the MSCI World Index2 gained 3.78% over the same period. Among regional mandates, Latin American managers led the table, up 4.47% during the month followed by Asia ex-Japan managers who were up 3.72%. Across strategies, CTA/managed futures hedge funds led the table with gains of 3.54% followed by long/short equities hedge funds which were up 2.37%.

Final asset flow figures for annual year 2017 revealed that managers reported performance-based gains of US$107.3 billion while recording net asset inflows of US$114.6 billion. Preliminary data for January shows that managers have posted performance-based gains of US$20.3 billion. Preliminary net asset flows were positive in January on the heels of US$13.3 billion of inflows into North American mandates. Redemption pressure continue to eased though a clearer picture should emerge in the coming months on the outlook for investor allocation into hedge fund regional and strategic mandates. This brings the current assets under management (AUM) of the global hedge fund industry to a total of US$2.49 trillion.

Figure 1a: Summary monthly asset flow data since January 2012
 

 

Key highlights for 2018:

  • Hedge funds started the year up 2.20% in January with managers reporting performance-based gains of US$20.3 billion while investor subscriptions stood at US$21.7 billion at the start of the year. In annual year 2017, final asset flow figures show that manager saw inflows totaling US$114.6 billion while performance-based gains stood at US$107.3 billion over the same period.
  • The Eurekahedge Billion Dollar Hedge Fund Index returned 1.77% in January; it’s best monthly return since January 2012 which translated into performance-based gains of US$12.8 billion during the month with net inflows of US$12.8 billion recorded. Over the past year, billion dollar hedge funds recorded strong investor interest with net inflows totaling US$66.5 billion while performance-based gains stood at US$53.7 billion.
  • North American hedge funds registered the strongest growth in AUM among all regional mandates in 2017, growing their asset base by US$136.4 billion over the year. Investor allocations to the region stood at US$13.3 billion as of January 2018, while US$12.8 billion of performance-based gains were recorded. This brings the AUM of North American hedge fund industry to reach a record high of US$1.66 trillion.
  • Asia ex-Japan hedge funds started the year on a positive note, up 3.72% for the month with underlying Greater China focused funds up 7.82% over the same period while India focused hedge funds were down 0.50% during the month. The Asian hedge fund space expanded by US$24.8 billion in 2017 through a combination of investor flows and performance driven gains.
  • CTA/managed futures hedge funds posted the best January 2018 returns, gaining 3.54%, with underlying trend-following hedge funds leading much of the strength, up 4.72% over the same period. Underlying commodity-focused managers gained 2.28% while FX-focused peers were down a modest 0.18%. Managers reported performance-based gains of US$6.9 billion during the month, while net investor inflows of US$2.0 billion were recorded.
  • Among volatility-focused hedge funds, short volatility hedge funds posted the worst performance in January 2018, down 3.30% while tail risk and long volatility hedge funds gained 1.27% and 0.01% over the same period.
  • The Eurekahedge Crypto-Currency Hedge Fund Index was down 4.55% in January following gains of 1477.85% in 2017 as bitcoin began its tumble.
  • The Eurekahedge Islamic Fund Index gained 6.19% over 2017, posting its best annual performance since 2013, owing to the global equity market rally and recovering oil price. Malaysia and Saudi Arabia remained as the two prime choices for Islamic funds, accounting for nearly half of the industry population in terms of head office location and domicile.
  • The US$95.2 billion Islamic fund industry assets grew by nearly 17% over the year, with investor inflows contributing 80% of the total asset growth, indicating stronger investor confidence after two consecutive years of investor redemptions. For more details refer to this month’s 2017 Overview: Key Trends in Islamic Funds report.

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1 Based on 48.03% of funds which have reported January 2018 returns as at 14 February 2018
2 MSCI AC World Index (Local)
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